Marketing Channel Strategies in Rural India: Lessons From

d.light Design

By Benjamin Neuwirth, Kellogg School of

Agenda
Background on d.light Design

Framework for Marketing Channel Success in Rural India

My Internship: Enabling a New Marketing Channel

Base of the Pyramid Markets

If we stop thinking of the poor

as victims or as a burden and
start recognizing them as
resilient and creative
entrepreneurs and valueconscious consumers, a whole
new world of opportunity will
open up.
- C.K. Prahalad 2006

Affordable Products to Alleviate Poverty

Affordable devices like treadle

pumps and drop irrigation
combined with a last mile supply
chain has helped 20 Million
people move out of poverty as a
result of IDEs work alone.
- Paul Polak 2011

d.Light Designs Founding

Inspiration

Product Solution

Many people in rural

Africa and India do not
have access to grid
electricity
Kerosene is expensive,
dangerous, unhealthy,
and provides weak light
Founders burned hand
in rural Africa

Affordable, bright lights for rural

consumers to promote health and
livliehood
Founded out of the Stanford
d.school by Sam Goldman and Ned
Tozun

d.Light Products
S250
Powerful spotlight
Mobile phone charger
$35 USD

S10
Great performance for cost
Perfect to light a room at night
$15 USD

S1
Ultra-portable and ultra-affordable
Designed to appeal to children
$9 USD

d.Light Products for Health and Livelihood

Benefits of d.light products for rural Indian
consumers
Safer cooking
More effective studying
Increased time for business activities

Central Question for d.light

How can a company attempting to enter a rural

region in an emerging market with a new product or
service and an unknown brand create a sustainable
business?

Agenda
Background on d.light Design

Framework for Marketing Channel Success in Rural India

My Internship: Enabling a New Marketing Channel

Framework for Marketing Channel Strategy in Rural India

Delivering Products

Distribution Network Design

Maintaining Customers
Distribution Network Logistics
After-Sales Service

Product Purchase

Customer

Activating Customers
Affordability

Brand Trust

Education

Framework for Marketing Channel Strategy in Rural India

Delivering Products

Distribution Network Design

Maintaining Customers
Distribution Network Logistics
After-Sales Service

Product Purchase

Customer

Activating Customers
Affordability

Brand Trust

Education

Distribution Network Design

Challenges

Solutions

Low Density of Demand

Leads to Slow Inventory
Turnover

Aggregate Consumer
Demand to a Point Required
by the Product

Distribution Network Design: Example

Aggregating Consumer Demand

Consumer Durables: Aggregate demand in cities

and hypermarts

FMCG Products: Aggregate

demand in villages

Distribution Network Design

Challenges

Solutions

Low Density of Demand

Leads to Slow Inventory
Turnover

Aggregate Consumer
Demand to a Point Required
by the Product

Poor Transportation
Infrastructure Raises
Transportation Costs

Use Hub-and-Spoke
Transportation and Rural
Entrepreneurs

Distribution Network Design: Example

Hub-and-Spoke Model
Coca-Cola

Hub

Independent
Entrepreneurs
Autorickshaw Delivering CocaCola in an Indian Village
Small

Distribution Network Design

Challenges

Solutions

Low Density of Demand

Leads to Slow Inventory
Turnover

Aggregate Consumer
Demand to a Point Required
by the Product

Poor Transportation
Infrastructure Raises
Transportation Costs

Use Hub-and-Spoke
Transportation and Rural
Entrepreneurs

Consumer Expectations for

Availability and Variety

Gain Insight Into

Consumers to Meet Their
Product Delivery
Expectations

Distribution Network Logistics

Challenges
High CapEx/OpEx required to set up a distribution
network in rural India
Fragmented distribution and logistics
industries
Potentially low chance of legal recourse if partner
contracts are violated

Solution: Distribution Network Piggybacking

Corporate Partnerships

Distribution Network Logistics: Example

Corporate Partnerships

Both Sara Lee and Proctor & Gamble entered into joint
ventures with local Indian companies to more effectively
distribute their products.

Distribution Network Logistics

Challenges
High CapEx/OpEx required to set up a distribution
network in rural India
Fragmented distribution and logistics
industries
Potentially low chance of legal recourse if partner
contracts are violated

Solution: Distribution Network Piggybacking

Corporate Partnerships
Local Non-Profit
Organizations

Distribution Network Logistics: Example

Local Non-Profit Organizations
Hindustan Unilevers Project Shakti
Unilever uses womens Self Help Groups to reach small
villages deep in rural India
The women buy the products with cash from Unilever, and
then distribute them in nearby villages
Project Shakti currently employs over 40,000 women
entrepreneurs

A women entrepreneur delivers Unilever products in rural

Information and picture sourced from MART internal presentation
India

Distribution Network Logistics

Challenges
High CapEx/OpEx required to set up a distribution
network in rural India
Fragmented distribution and logistics
industries
Potentially low chance of legal recourse if partner
contracts are violated

Solution: Distribution Network Piggybacking

Corporate Partnerships
Local Non-Profit
Organizations
Business-to-Business
Sales

Distribution Network Logistics: Example

Business-to-Business Sales
Distributio
n
Rider
Compan
y

Sales

Pros
Bulk Sales to carrier company
Manage fewer relationships

Carrier
Compan
y

Cons
Low visibility into end customer
sales and product reception

Agenda
Background on d.light Design

Framework for Marketing Channel Success in Rural India

My Internship: Enabling a New Distribution Channel

Area of Operation: Uttar Pradesh

Location of Uttar Pradesh in India
Facts about Uttar Pradesh:
Population of 200 Million people
Half the size of California
Annual per-capita GDP of $294 USD
per year
Most residents do not have access
to grid electricity

d.lights New Distribution Partner

2009-2010:
d.light set up a custom distribution network in Uttar Pradesh to
supply solar lamps into small retail stores in villages.
The network failed due to high distribution costs and low
consumer demand.
2011
d.light forms a piggybacking relationship with Bharat Petroleum
(BPCL), the second largest oil-product distributor in India, to
distribute solar lamps in Uttar Pradesh.

My Internship
Analyze the BPCL distribution network
Recommend strategies for successfully selling d.light products
through the BPCL network

Analysis of BPCL Distribution Network

BPCL has 281 cooking gas retail stores in Uttar

Pradesh. Each stores serves thousands of
consumers, effectively aggregating demand for
d.light.

BPCL also sells FMCG and consumer goods in its

retail stores in order to have other non-oil revenue
stream. D.light products will be sold as part of this
program.

Each store is owned by an independent franchisee.

While the owners felt good about d.light, they were
not highly motivated to sell d.light products.

50% of BPCL customers come to the retail store to

pick up their cooking gas. While at the store they
may buy other products or schedule their next
cooking gas pick-up.

The other 50% of BPCL customers have their

cooking gas delivered to them. The delivery men
are a true last-mile link to rural consumers in India.
The delivery men are often poorly educated and
have little or no sales experience.

Analysis and Recommendations

Analysis of the BPCL Distribution Channel
Pros
Consolidates demand into central retail points
Established and successful warehousing and logistics network
BPCL is a very trusted brand with Indian consumers
Cons
Retail store owners not motivated to sell d.light products
BPCL end customers may not need d.light products
Recommendations
Incentivize BPCL management and retail store owners to sell d.light
products
Piggyback off of the BPCL brand to establish the d.light brand
Educate consumers in Uttar Pradesh who use kerosene for light
about solar lamps, and drive sales at BPCL retail stores
Establish d.light distribution centers in Uttar Pradesh to provide for
better product restocking time